WASHINGTON (CNN) --U.S. officials evaluated their options Wednesday now that the United States has custody of a big name terrorist, albeit one whose most infamous act took place nearly two decades ago.

U.S. Special Forces found Palestinian activist Muhammed "Abu" Abbas in Baghdad Monday night, according to U.S. Central Command. (Full story)

Abbas heads the Palestinian Liberation Front, the offshoot of the Palestinian Liberation Organization that staged the 1985 hijacking of the Italian cruise ship Achille Lauro, killing a disabled American Jew and dumping his body and wheelchair overboard.

The killing of Leon Klinghoffer, 69, sparked outrage in the Western world. (More)

With Abbas in custody, U.S. officials must decide what to do with him.

He was convicted in absentia in Italy and sentenced to life in prison, and Italian Justice Minister Roberto Castelli said Wednesday Italy would seek the convicted terrorist's extradition to serve the sentence. (Profile)

The United States could bring its own charges against Abbas, although a criminal complaint filed against him in 1986 was dropped a short time later without an indictment.

Officials said Wednesday new charges against Abbas would probably have to entail new evidence.

Victoria Toensing, the former deputy assistant attorney general in charge of the government's Abu Abbas case at that time, said the complaint against Abbas was dropped because the evidence against him, which they initially had been told was "as clear as can be" turned out on examination to be weak.

She said officials "were very sad" that they had to drop the case, but she added that when the Italian government convicted Abbas in absentia, "that took care of the problem for us."

Toensing recommended that same approach be taken this time, once U.S. interrogators have gotten what information they can from him.

"If we've got an Italian conviction and the courts can take care of it in Italy, why do we want to cause more problems for ourselves by bringing him here on something that we don't even think we have the evidence for right now? I would say let's go with the Italian solution," she said.

"We've got a bird in the hand in Italy, and that's called a conviction."

For now, a senior Justice Department official said, "Everybody is talking to everybody from several agencies, including the Defense Department" as they determine the best course.

But Palestinian Cabinet member Saeb Erakat said Wednesday the United States violated the Oslo peace accords when it seized Abbas, and should let him go.

We've got a bird in the hand in Italy, and that's called a conviction.

-- Victorial Toensing, former Justice Department official

The Israeli-Palestinian agreement, covering the West Bank and Gaza, was signed in 1995 by the Israel and the Palestine Liberation Organization and was witnessed by the United States, the European Union, Russia, Jordan, Egypt and Norway.

That agreement specified that no member of the Palestine Liberation Organization was to be arrested or brought to court for any action that happened prior to September 13, 1993, said Erakat, who said he contacted American officials in Israel Wednesday morning.

The Palestinian Authority called for Abbas' release. "We want the U.S. to respect and honor the agreement and release Abu Abbas," said Erakat.

Witnesses, however, are not typically bound to the terms of an agreement signed by other parties.

Israeli said Abu Abbas never fully complied with the agreement, which Israelis say also called for Palestinians to renounce terrorism and fully support Mideast peace.

"There is no free lunch," said Ra'anan Gissin, spokesman for Israeli Prime Minister Ariel Sharon. "The man never mended his ways. He did not stop terrorist activities and put all his efforts on behalf of peace. He continued to ... organize terrorist activities."

The U.S. Central Command's deputy director of operations, Brig. Gen. Vincent Brooks, had a similar stance.

"He was a terrorist, he remains a terrorist and he will be viewed as such," Brooks said. "Notwithstanding any declarations that have been made in recent years, his links to terrorism remain abundantly clear."

Achille Lauro incident

In 1996, Abbas said that the time for armed struggle in support of Middle Eastern peace was over. He told CNN that the Achille Lauro incident was all a mistake, a military mission that went wrong.

Klinghoffer in an undated family photo.

"There was no plan to hijack the ship or hurt the people aboard," he said.

But two years later he told the Boston Globe a slightly different story.

"(Klinghoffer) created troubles. He was handicapped but he was inciting and provoking the other passengers. So the decision was made to kill him," he told the newspaper.

Some officials believe Abbas may have been a conduit of money Saddam Hussein gave to the families of Palestinian suicide bombers.

Brooks said the discovery of Abbas in Baghdad bolsters U.S. claims that Iraq under Saddam harbored and supported terrorists.

"We've said for a long time that Baghdad and Iraq and the regime that no longer exists have harbored terrorists, have provided a safe haven for terrorists and in some cases have facilitated the operations of terrorism," he said. "I think the arrest of Mr. Abbas makes it very clear that that was true."

"The future is he's going to be maintained in our custody," said Cmdr. Kevin Aandahl, public affairs officer for U.S. Special Forces. "His status is going to be determined by the United States government."

He told CNN the apprehension was a "big, big, big event" that special operations forces can be proud of.

"We've been watching him over a period of years," Aandahl said. "In a case like this where you can go in, act on some very good intelligence ... go in there and get him and not have anybody hurt, this is a textbook case."